Still a lot of deep seeded fear in the market.
IMHO Greenspan will have to act much more aggressively in the near future to stop a near panic.
go2net.com
Stocks Drop, Fears Sweep Wall Street
Jan 5 12:42pm ET
By Denise Duclaux
NEW YORK (Reuters) - Stocks were planted deep in negative territory in midday trading on Friday as fears that the economic pullback is souring corporate profits dominated Wall Street, just two days after the Federal Reserve lowered interest rates and sparked an explosive rally.
Investors added another worry to their long list of concerns after a tumultuous 2000 for the market, now fearing that major U.S. banks could be hit with losses from their lending to struggling California utilities.
"It's hard to make the case that an interest-rate cut is the solution to all problems," said Bill Meehan, chief market analyst at Cantor Fitzgerald & Co.
The Nasdaq Composite Index <.IXIC> stumbled 108.63 points, or 4.23 percent, to 2,458.20, after tumbling more than 5 percent earlier in the session. Cisco Systems Inc. , the world's No. 1 maker of gear that powers the Internet, fell $3-3/16 to $38-11/16 and led the tech-stacked index lower.
The Dow Jones industrial average <.DJI>, the closely watched blue-chip gauge, dropped 188.99 points, or 1.73 percent, to 10,723.42, after losing more than 2 percent initially. The broader Standard & Poor's 500 Index <.SPX> fell 21.48 points, or 1.61 percent, to 1,311.86.
"After the digestion of the news and the euphoria, what we are interpreting the rate cuts to mean is that there is more weakness and a greater slowdown in the economy than thought," said George Rodriguez, senior vice president at Guzman & Co.
Rumors circulating around Bank of America Corp. unleashed a wave of tension on Wall Street. Speculation mounted that one of California's largest utilities had drawn down a line of credit at Bank of America and that the bank had large losses in derivatives trading.
But the bank issued a statement denying any significant derivative or trading losses. The company added that it remained comfortable with its guidance for credit quality in 2001. Its stock lost $3-7/16 to $48-1/16 on the New York Stock Exchange.
"The question is: Is this Fed cut going to be able to allay the credit quality concerns that have hit not only the banks but the junk bond market?" said Peter Gottlieb, vice president and portfolio manager at First Albany Asset Management.
Indeed, Bank of America failed to assuage investor concerns and financial stocks remained under water. Citigroup Inc. , down $1-3/4 to $53-15/15, American Express Co. , off $2-1/4 to $51-15/16 and JP Morgan Chase & Co. , off $2-3/4 to $49-1/4, dragged on the Dow in heavy trading.
Minnesota Mining and Manufacturing Co. fell $7-1/2 to $111-1/2, weighing on the Dow, after Lehman Brothers cut its 2001 earnings estimate for the industrial conglomerate due to the slowing U.S. economy.
Retailing heavyweights Home Depot Inc. , down $2-3/16 to $49-1/2, and Wal-Mart Stores Inc. , down $2-1/16 to $54-1/8, also cast a pall on the blue-chip Dow. The investment house Robertson Stephens lowered its year 2000 and 2001 earnings target for Wal-Mart, the world's largest retailer.
Auto giant General Motors Corp. surrendered $2-3/16 to $54-15/16 after Salomon Smith Barney lowered its 2001 earnings estimate for the Dow component.
"The Bank of America scare was an excuse, but I think the amount of earnings disappointments has really spooked the market," said Guy Truicko, portfolio manager at Unity Management.
The market is worried that "the Fed missed it, that they didn't do enough and now they're trying to scramble to catch up," he added.
Telecom group WorldCom Inc. edged down 1/2 to $18-15/16. Fiber-optic parts maker JDS Uniphase Corp. fell $3-1/4 to $44-5/8. Chip giant Intel Corp. slipped $1-7/64 to $32-11/16. All three weighed on the Nasdaq.
Applied Micro Circuits fell $8-7/16 to $54-15/16 on the Nasdaq after Bank of America Securities cut its share price target for the communications chip maker.
Investors got another dose of economic data pointing to a slowing economy before the opening bell. The nation's unemployment rate held steady at 4.0 percent in December as the number of workers on payrolls grew modestly, the government said.
"The employment numbers, although they were close to expectations and maybe a little bit weaker, confirm that the economy generally is slowing," said Hugh Johnson, chief investment officer at First Albany Corp. |
